A self-directed solo 401k from My Solo 401k Financial may be invested in bitcoin / cryptocurrency using Coinbase, and many of our clients have been making investments in bitcoin using Coinbase since 2014 when the IRS deemed cryptocurrency property.
What is Cryptocurrency?
Per IRS Revenue Ruling 2019-24:
- Virtual currency is a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value.
- Cryptocurrency is a type of virtual currency that uses cryptography to secure transactions that are digitally recorded on a distributed ledger, such as a blockchain.
Most popular cryptocurrencies:
- Bitcoin
- Ethereum
- Litecoin
IRS View on Taxation of Cryptocurrency
Steps to Invest Self-Directed Solo 401k Funds Using Coinbase
STEP 1 – Open a Solo 401k
- Confirm that you are eligible (self-employed w/ no full-time W2 employees)
- IRS-approved plan that allows for cryptocurrency investments & provider with experience in helping others invest
STEP 2 – Fund the Solo 401k
- Open a bank account in the name & EIN of the Solo 401k
- Rollover Former employer plan or non-Roth IRA funds and/or make 401k contributions
STEP 3 – Open & Fund Account at Cryptocurrency Exchange
- Open a Cryptocurrency Exchange Account in the name & EIN of the Solo 401k
- Link the solo 401k bank account to the Coinbase account
STEP 4 – Store Cryptocurrency
- Separate and segregated wallet exclusively for Solo 401k investments
- Store in safety deposit box associated with Solo 401k bank account
